Main Street fears new regulation in coronavirus economic reopening

For several weeks from March into April, new regulations to mitigate the threat from the novel coronavirus sprang up almost every day: first social distancing recommendations, then stay-at-home orders, then restaurant bans, gym closures and nonessential business shutdowns. Now, as the country looks to reopen the economy, an entirely different set of standards are being introduced.

For small businesses, operating under these increasing regulations has become nearly impossible — not that they have much choice.

In the latest CNBC|SurveyMonkey Small Business Survey, almost a third of small business owners have been required by their state or local government to close their in-person business operations, and 23% have temporarily closed their entire business.

Looking further ahead, small business owners are daunted by the idea of keeping up with a continually changing gauntlet of regulatory hurdles. In the survey, conducted April 21–27, 38% of small business owners said they expect changes in government regulations to have a negative effect on their business in the next 12 months. That is the highest that value has been in the three-plus years of the survey, which reaches more than 2,000 small business owners in the U.S. every quarter.

The rise in pessimism is steep. Just three months ago only 26% anticipated a negative impact from regulatory changes, and the 12 percentage-point quarter-over-quarter increase is the sharpest change in that measure over the history of the survey. Meanwhile, the number saying they expect a positive effect on their business ticked down from 23% to 20%, and the number saying they expect no effect dropped from 50% to 40%.

As difficult as it may be, small businesses will have to adjust to increased regulations in order to reopen.

Simply declaring the economy to be open for business will serve no purpose if people are afraid to leave the safety of their homes. Regulations provide reassurance that the public and private sectors are working together to protect everyone: consumers, workers and business owners alike.

What it will take to reopen

Reopening will require some trade-offs. Government regulations can help allay fears among workers and consumers as well as provide guidance and resources for business owners who want to know how to proceed. Various public opinion polls conducted in the past few weeks reveal that despite a deep desire to return to normal, most people in the general public are hesitant to eat at restaurants, attend events, go shopping, go back to work or send their kids to school without precautions.

Protests like those in Illinois over the weekend may draw outsized media attention, but regular tracking polls conducted by Gallup and others continue to find that a solid majority of the public is content to comply with stay-at-home orders by local public health officials. These numbers hold for people of every age group and in all regions of the country.

A recent Washington Post–University of Maryland poll found widespread support for state restrictions on businesses and public gatherings. In that survey, two-thirds of people (66%) say current restrictions on how restaurants, stores, and other businesses operate are “appropriate,” while just 17% say they are “too restrictive” and another 16% even say they are “not restrictive enough.”

A shopper wears a protective mask while browsing through the Island Cotton Company store as the state of Florida enters phase one of the plan to reopen the state on May 4, 2020 in Stuart, Florida.

Joe Raedle | Getty Images

More regulations will continue to come from all levels of government. Many localities now require grocery stores and other essential storefronts to turn away customers who aren’t wearing masks. Restaurants that are allowed to reopen may be required to have a minimum distance between tables or a steeply reduced maximum number of people allowed inside at one time. Even businesses without customers will likely face new regulations on cleaning or sick leave policies that are meant to protect employees from infecting each other.

In SurveyMonkey’s own coronavirus tracking polling, 64% of people in the U.S. surveyed April 27-May 3 said they are more concerned that businesses in their area will reopen too quickly rather than reopen too slowly. A majority of people continue to consider the coronavirus outbreak more of a health crisis than an economic crisis, both for themselves and for the country as a whole. Those numbers have remained steady for the past three weeks’ running.

The coronavirus outbreak has had a devastating effect on the economy, but most people consider it to be first and foremost a health crisis. Without a vaccine, and with hospitals still overwhelmed by patients, businesses can’t expect to reopen without significant operational changes and safety precautions in place.

The new normal on Main Street

Among the general public, few expect to go back to their old lives anytime soon anyway. In SurveyMonkey’s polling in early April, 20% of people said they expected life in their area to be back to normal in seven months or more. That number has grown each week; 34% now think it will be at least December before any sense of normalcy has returned.

For small business owners, the shock of the coronavirus upended all expectations for 2020 and beyond. The spike in negative expectations on regulations was certainly not the only change in small business sentiment from January to now.

The number of small business owners who describe current conditions as “good “had been dancing around the mid- to high-50% range for eight straight quarters before its plummet to 18% just now. Similarly, the number of small business owners forecasting revenue growth had never fallen below 52% in the history of the survey — until it dropped to 38% this quarter.

Though these drops were steep, the path back up to their normal levels will likely be staggered, as small businesses come back online industry by industry, city by city, and storefront by storefront. Polling indicates a clear public preference for safety over haste in reopening, and regulations introduced by local, state, and federal agencies can help to assuage those concerns.

Small business owners are rightfully overwhelmed by the degree to which they have already had to adapt to this new business environment, and their skepticism of additional government restrictions is understandable. But certain regulations will become necessary in order to reopen the economy, no matter how onerous they are for businesses to implement. The ability to reopen the economy depends on our collective responsibility to safeguard public health, and small businesses represent a core piece of that in their local communities.

The CNBC|SurveyMonkey Small Business Survey for Q2 2020 was conducted across 2,200 small business owners between April 21–27. The survey is conducted quarterly using SurveyMonkey‘s online platform and based on its survey methodology. The Small Business Confidence Index is a 100-point score based on responses to eight key questions. A reading of zero indicates no confidence, and a score of 100 indicates perfect confidence. The modeled error estimate for this survey is plus or minus 2.5 percentage points.